Navigating the Pitfalls of Facility Insurance

If you are based in a province that offers facility insurance and you are using facility insurance, you are or were likely in trouble.

If you use facility insurance, it will either slowly or quickly put your company into bankruptcy. What makes the facility insurance market so problematic? Facility insurance is often 3 to 5 times what you would pay in the regular insurance market. Depending on the province you are based in, the insurance coverage is not as comprehensive as the regular market. Insurance brokers in Alberta have reported that facility insurance rates are increasing significantly this year, potentially reflecting the disastrous facility insurance rates seen in Ontario.

But what exactly is facility insurance? It is insurance for those who do not qualify for the “regular market” insurance. The regular market is when you go to an insurance broker and request insurance for your trucking company, and the broker can provide you with competitive quotes. This is the norm and how the insurance industry should function. However, many trucking companies, for one reason or another, do not have access to the regular market.

The reasons can be many. New companies just starting up may not be able to prove that the management team has at least three years of prior trucking management experience. This is perhaps the most common reason companies are forced into the facility market. Regular insurance companies want to ensure that the management team of a new startup company has the necessary experience to run a safe and successful trucking enterprise. Many new Canadians who wish to start a trucking company cannot prove they have previous experience, and this will often force them into the facility market.

Another common reason that trucking companies are forced into the facility insurance market is that they have poor safety scores. Insurance companies closely monitor a company’s national safety code profile (called CVOR in Ontario) and, if the company operates in the US, their SMS scores. They also closely watch for any crashes or driver errors. Insurance companies are in the business to make a profit, and as publicly traded entities, they must ensure a return on their investments. This can sometimes lead to the perception that the insurance industry is profiting excessively from the trucking sector.

How can a company escape the facility insurance market? The solution depends on the reason for being in that market. If it’s due to a lack of experience, the company may seek a co-owner with the required experience. If it’s because of poor safety scores and too many crashes, the company must address those underlying issues.

It’s important to note that not all companies in the facility insurance market deserve to be there. If you are in the facility insurance market and want more information about what you can do and perhaps how you can get out, you may want to reach out to me for assistance. I may be able to provide guidance and support to help you navigate this challenging insurance landscape.

Stay safe.

Chris Harris
Top Dawg, Safety Dawg Inc.
@safety_dawg (twitter)

About Chris Harris, Safety Dawg

Chris has been involved in trucking most of his adult life. He drove truck for and worked in various office/management positions for a major truck company. His last position of 5 years in the safety department where he was responsible for the recruiting of Owner Operators and their compliance. He joined a trucking insurance company in 2001 and has been in the insurance side of things until making Safety Dawg a full-time endeavour.